Share this article

The Social Democrats said on Friday they would not advocate for an outright ban on profits by companies working in the welfare sector, arguing instead for stronger regulations, increased transparency, and tougher demands on quality.

“We have found a good, effective solution,” party leader Stefan Löfven said at a press conference on Friday, the TT news agency reported.

The issue of curbing profits earned by companies that operate schools and hospitals has been the subject of heated debate with the Social Democratic party in recent months, with some factions arguing for an outright ban, while others countered that doing so was impractical and counterproductive.

But on Friday, Löfven announced that the party's governing board had come together around a compromise solution that would help ensure companies operating in the public sector were more accountable and used taxpayer money more effectively.

“The goal with this is to maintain freedom of choice and develop private providers of public services,” he said.

"It would have been oversimplifying things to propose a ban on profits."

Instead, the party wants to place indirect limits on profits though increased transparency, tougher regulations, and more stringent quality requirements.

The Social Democrats also wants companies to refrain from trying to avoid paying tax in Sweden through the use of complicated intra-firm lending and other tax planning schemes.

Higher demands would also be placed on exactly who can run a company in the welfare sector, another part of what Löfven referred to as “a very balanced proposal.”

In addition, the party wants to scrap current rules which allow companies to start up freely, and instead give final say on establishment of new welfare sector firms to the municipalities themselves.

For example, for a publicly-funded, privately-managed free school to open, it would need to go through a compulsory consultation with the municipality to look more closely at the number of students as well as situation in the municipality as a whole.

Löfven also called for a more effective, needs-based distribution of taxpayer funds to companies operating in the welfare sector.

“Today's compensation system is ineffective,” Löfven said, emphasizing that schools that need extra resources because they have students in need of extra support would receive additional funds.

The Social Democrat head also explained that a transparency requirements would apply equally to all firms operating in the welfare sector and that private firms wouldn't simply be able to provide a statement of accounts at the corporate level.

“Trust me, I know how money gets moved around in corporations,” he added, stressing that it would not be possible to get funds for ten teachers but then only hire seven.

While the Commercial Employees' Union (Handelsanställdas förbund - Handels) welcomed the proposal, the union argued that more could have been done.

“We have nothing against the proposal, but we don't think it's enough. We want to have a profit limit,” said spokeswoman Kristina Jogestrand to TT.

Meanwhile, Göran Hägglund, head of the Christian Democrats, accused Löfven of bowing to pressure from left-wing factions within his party, pointing out that, according to the Social Democrats' proposal, municipalities would have too much say in whether new firms could start up.

"It means that power is shifted away from citizens, patients, and students to political bodies. And that surprises me considering signals sent out by Löfven earlier in the week," Hägglund told TT.